EDITORIAL: Pa. can do better than arbitrary gas impact fee'

It might seem strange that counties with no natural gas fracking get money from what is called an “impact fee” on Marcellus Shale fracking.

The impact fee was to pay for environmental protection and infrastructure improvements in areas directly affected by the drilling. At least that’s what the purpose seemed to be. Why else call it an impact fee?

The distribution of the funds, in a way, illustrates how Harrisburg functions — or dysfunctions. To get political support for the fee, and to fend off calls for an extraction tax levied by many other states with active fracking industries, it appears that the money is handed out for political favor.

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An “impact fee” gives local legislators cover for not supporting a severance tax (widely supported by citizens) that would go a long way toward solving the state’s continuing budget problems. It gives local legislators (and county commissioners) the chance to put out press releases taking credit for bringing home the bacon — kind of a Keystone version of pork barrel spending.

In Pennsylvania, for years, that kind of spending was known as WAMs (Walking Around Money) — money allocated to local legislative districts with few strings attached. And while many of the projects funded with the impact fees are worthwhile — farmland preservation, watershed protection, etc. — it would seem that the money could be put to better use, considering the state’s budget issues.

The most glaring problem, as always, is school funding. The issues with how we pay for education are well-known — reliance on unprogressive property taxes, inequities in how state money is distributed among school districts — and the money from fees could help set that right.

One of the problems is with the impact fee itself. The fee is based on the number of wells drilled and the average annual price of natural gas. It is a low-ball tax on a hugely profitable industry. In 2013, according to the liberal advocacy group Pennsylvania Budget and Policy Center, drillers paid taxes totalling $223 million. That is an effective tax rate of just 1.9 percent on the value of the natural gas the industry extracts from our land.

It would be more beneficial for the state to also levy an extraction tax on the volume and value of the gas produced in the state. A 5-percent extraction tax — as proposed by Democratic gubernatorial candidate Tom Wolf — would produce an additional $400 million a year. The argument against the extraction tax is that it would stifle the industry, though there is little evidence to support that claim. Other states levy extraction taxes on top of impact fees and have booming fracking industries. Texas, for example, levies a 7 percent extraction fee.

An extraction tax should be used to fund education and reduce school districts’ reliance on property taxes to pay for schools.